AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
DELTAPOINT, INC.,
IDC ACQUISITION CORP.,
INLET, INC.
AND
INLET DIVESTITURE CORP.
NOVEMBER 19, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation; Bylaws. . . . . . . . . . . . . . . . 2
1.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Merger Consideration; Effect on Capital Stock . . . . . . . . . . . 3
(a) Merger Consideration. . . . . . . . . . . . . . . . . . . . . . 3
(b) Conversion of IDC Stock . . . . . . . . . . . . . . . . . . . . 3
(c) Capital Stock of Merger Sub . . . . . . . . . . . . . . . . . . 4
(d) Delivery of Consideration . . . . . . . . . . . . . . . . . . . 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF INLET AND IDC . . . . . . . . 4
2.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 IDC Limited Purpose Representations . . . . . . . . . . . . . . . . 6
(a) No Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Restrictions on Business Activities . . . . . . . . . . . . . . 6
(c) Title to Properties; Absence of Liens and Encumbrances. . . . . 6
(d) Agreements, Contracts and Commitments . . . . . . . . . . . . . 6
2.5 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Brokers' and Finders' Fees; Third Party Expenses. . . . . . . . . . 9
2.11 Tax and Other Returns and Reports.. . . . . . . . . . . . . . . . . 9
(a) Definition of Taxes . . . . . . . . . . . . . . . . . . . . . . 9
(b) Tax Returns and Audits. . . . . . . . . . . . . . . . . . . . . 9
2.12 Employee Matters and Benefit Plans. . . . . . . . . . . . . . . . .11
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(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .11
(b) Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(d) Employee Plan Compliance. . . . . . . . . . . . . . . . . . . .13
(e) Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . .13
(f) Multiemployer Plans . . . . . . . . . . . . . . . . . . . . . .13
(g) No Post-Employment Obligations. . . . . . . . . . . . . . . . .13
(h) COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(i) Effect of Transaction . . . . . . . . . . . . . . . . . . . . .14
(j) Employment Matters. . . . . . . . . . . . . . . . . . . . . . .14
(k) Labor.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(l) International Employee Plan . . . . . . . . . . . . . . . . . .15
2.13 Investment Matters. . . . . . . . . . . . . . . . . . . . . . . . .15
2.14 Continuity of Interest. . . . . . . . . . . . . . . . . . . . . . .15
2.15 Representations Complete. . . . . . . . . . . . . . . . . . . . . .15
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF DELTAPOINT AND MERGER
SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.1 Organization, Standing and Power. . . . . . . . . . . . . . . . . .15
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.3 SEC Documents; DeltaPoint Financial Statements. . . . . . . . . . .16
3.4 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . .17
3.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.6 Brokers and Finders' Fees . . . . . . . . . . . . . . . . . . . . .17
3.7 Securities Law Compliance; Due Issuance; Rule 144 Reporting . . . .17
3.8 Capital Stock of DeltaPoint and Merger Sub. . . . . . . . . . . . .17
3.9 Reorganization Representations. . . . . . . . . . . . . . . . . . .17
3.10 Representations Complete. . . . . . . . . . . . . . . . . . . . . .18
ARTICLE IV - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . .18
(a) Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
(b) Notification. . . . . . . . . . . . . . . . . . . . . . . . . .20
4.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.3 No Encumbrance. . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.5 Non-Competition and Non-Solicitation Agreements . . . . . . . . . .21
4.6 Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
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4.8 License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.9 Termination of Consulting and OEM Agreement.. . . . . . . . . . . .22
4.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . .22
4.11 Liability for Taxes; Tax Returns. . . . . . . . . . . . . . . . . .23
4.12 Cooperation and Contest Provisions. . . . . . . . . . . . . . . . .23
4.13 Further Action; Tax Treatment . . . . . . . . . . . . . . . . . . .23
ARTICLE V - CONDITIONS TO THE CLOSING. . . . . . . . . . . . . . . . . . . .23
5.1 Conditions to Obligations of Inlet. . . . . . . . . . . . . . . . .23
(a) Representations and Warranties. . . . . . . . . . . . . . . . .23
(b) Agreements and Covenants. . . . . . . . . . . . . . . . . . . .24
(c) No Injunctions or Restraints; Illegality. . . . . . . . . . . .24
(d) Material Adverse Change . . . . . . . . . . . . . . . . . . . .24
(e) Perpetual Site License. . . . . . . . . . . . . . . . . . . . .24
5.2 Conditions to the Obligations of DeltaPoint . . . . . . . . . . . .24
(a) Representations and Warranties. . . . . . . . . . . . . . . . .24
(b) Agreements and Covenants. . . . . . . . . . . . . . . . . . . .24
(c) Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(d) No Injunctions or Restraints; Illegality. . . . . . . . . . . .24
(e) Material Adverse Change . . . . . . . . . . . . . . . . . . . .25
(f) Non-Competition and Non-Solicitation Agreements . . . . . . . .25
(g) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE VI - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. .25
6.1 Survival of Representations and Warranties. . . . . . . . . . . . .25
6.2 Indemnification of DeltaPoint . . . . . . . . . . . . . . . . . . .25
6.3 DeltaPoint's Knowledge of Breaches. . . . . . . . . . . . . . . .26
6.4 Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
6.5 Procedure for Indemnification . . . . . . . . . . . . . . . . . . .26
6.6 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . .27
6.7 Indemnification of Inlet. . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . .27
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . .28
7.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE VIII - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . .28
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8.1 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . .28
8.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . .28
8.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
8.4 Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . .29
8.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
8.6 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .29
8.7 Governing Law; Forum. . . . . . . . . . . . . . . . . . . . . . . .29
8.8 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . .29
8.9 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . .30
8.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . .30
8.11 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . .30
8.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.13 Independent Counsel . . . . . . . . . . . . . . . . . . . . . . . .31
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TABLE OF CONTENTS
(CONTINUED)
PAGE
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A IDC Articles of Incorporation
Exhibit B IDC Bylaws
Exhibit C Form of Non-Competition and Non-Solicitation Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of November 19, 1997, by and among (i) DeltaPoint, Inc., a
California corporation ("DELTAPOINT"), (ii) IDC Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of DeltaPoint ("MERGER SUB"), (iii)
Inlet, Inc., an Iowa corporation ("INLET"), and (iv) Inlet Divestiture Corp.,
an Iowa corporation and a wholly owned subsidiary of Inlet ("IDC").
RECITALS
A. DeltaPoint wishes to acquire from Inlet all of IDC's internet
technologies including, without limitation, the CurrentIssue software
technology (the "INTERNET TECHNOLOGY").
B. All the Internet Technology is held by IDC.
C. Inlet is the owner of and has good and valid title to all of the
capital stock of IDC (the "IDC STOCK"), free and clear of any legal or
equitable encumbrances.
D. Each of the Boards of Directors of Inlet, IDC, DeltaPoint and
Merger Sub believe it is in the best interests of each company and their
respective shareholders that DeltaPoint acquire IDC through the statutory
merger of IDC with and into Merger Sub (the "MERGER") and, in furtherance
thereof, have, in principal, approved the Merger.
E. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of IDC, shall be converted into the right to receive
360,000 shares of DeltaPoint Common Stock and certain cash amounts, payable
as provided herein.
F. Pending the closing of the Merger, on June 13, 1997, (i) Inlet, IDC
and DeltaPoint entered into a software license agreement (the "OEM
AGREEMENT") granting to DeltaPoint, among other things, certain exclusive
marketing rights to the Internet Technology and (ii) Inlet and DeltaPoint
entered into a consulting agreement (the "CONSULTING AGREEMENT") pursuant to
which Inlet granted to DeltaPoint the right to begin customizing the source
code for the Internet Technology.
G. Inlet, DeltaPoint and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
H. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and
valuable consideration, the parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law (the "DGCL")
and the Iowa Business Corporation Act (the "IBCA"), IDC shall be merged with
and into Merger Sub, the separate corporate existence of IDC shall cease, and
Merger Sub shall continue as the surviving corporation and as a wholly-owned
subsidiary of DeltaPoint. Merger Sub as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than two (2) business days,
following satisfaction or waiver of the conditions set forth in Article VI,
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is
agreed to in writing by DeltaPoint and Inlet. The date upon which the
Closing actually occurs is herein referred to as the "CLOSING DATE." On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a Certificate of Merger with the Secretary of State of the State of
Delaware and the Articles of Merger with the Secretary of State of the State
of Iowa (collectively, the "CERTIFICATES OF MERGER"), in accordance with the
relevant provisions of the DGCL and IBCA (the time of acceptance by the
Secretary of State of the State of Delaware and the State of Iowa of such
filings being referred to herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL and the
IBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of IDC and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities, obligations and duties of IDC and Merger Sub shall
become the debts, liabilities, obligations and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by DeltaPoint prior to the
Effective Time, at the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law, PROVIDED, HOWEVER, that Article I of
the Certificate of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is "SiteMaster,
Inc.".
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
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1.5 DIRECTORS AND OFFICERS. The directors and officers of the
Surviving Corporation immediately after the Effective Time shall be the
directors and officers of Merger Sub.
1.6 MERGER CONSIDERATION; EFFECT ON CAPITAL STOCK.
(a) MERGER CONSIDERATION. The consideration (hereinafter referred
to as the "MERGER CONSIDERATION") to be provided by DeltaPoint and Merger Sub
in exchange for all outstanding IDC Stock shall be 360,000 shares of
DeltaPoint Common Stock and an aggregate amount of cash equal to $825,000.
Subject to the terms and conditions of this Agreement, as of the Effective
Time, by virtue of the Merger and without any action on the part of Merger
Sub, IDC or the holder of any shares of IDC Stock, the following shall occur:
(b) CONVERSION OF IDC STOCK The IDC Stock issued and outstanding
immediately prior to the Effective Time will at the Effective Time be
canceled and extinguished and converted into the right to receive the
following consideration:
(i) 360,000 shares of DeltaPoint Common Stock payable on the
Closing Date; and
(ii) $825,000 payable as follows:
(A) $125,000 of payments previously made pursuant to the
OEM Agreement and the Letter of Intent with respect to
the Merger between Inlet and DeltaPoint will be
credited thereto at Closing;
(B) $350,000 will be payable at Closing; and
(C) $350,000 will be payable, at DeltaPoint's option, (i)
on the first anniversary of the Closing or (ii) in four quarterly
payments of $87,500 commencing on the first anniversary of the
Closing, together with interest (calculated on a simple interest
basis) on the unpaid balance calculated from the Closing Date to the
date of payment at an annual percentage rate of 20%; PROVIDED,
HOWEVER, that if the amount of DeltaPoint's cash and/or cash
equivalents drops below $1,500,000 at any time, then the outstanding
balance of the $350,000 payable pursuant to this clause (C) on such
date, plus accrued but unpaid interest to such date, shall become
immediately due and payable. Interest accrued on the principal
amounts due from DeltaPoint shall be payable monthly beginning on the
Closing Date. With each monthly interest payment made by DeltaPoint
pursuant to this Section 1.6(b)(ii)(C), DeltaPoint shall submit a
current certified monthly statement stating DeltaPoint's current cash
and/or cash equivalents at the time of such statement.
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(c) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall represent one validly issued, fully paid and nonassessable share of
Common Stock of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(d) DELIVERY OF CONSIDERATION. DeltaPoint will deliver to Inlet a
certificate representing the 360,000 shares of DeltaPoint Common Stock at the
Closing. Payment of the cash consideration on the respective installment
dates as set forth above will be, at the option of DeltaPoint, by cashier's
check payable to the order of Inlet or by wire transfer to an account of
Inlet at a bank specified by Inlet.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INLET AND IDC
Each of Inlet and IDC, jointly and severally, hereby represents and
warrants to DeltaPoint, subject to such exceptions (referencing the
appropriate section number) as are specifically disclosed in the Inlet
Disclosure Schedule provided to DeltaPoint on the date hereof (the "INLET
DISCLOSURE SCHEDULE"), as follows:
2.1 ORGANIZATION. Each of Inlet and IDC is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Iowa. Each of Inlet and IDC has the corporate power to own its properties
and to carry on its business as now being conducted and as proposed to be
conducted. Each of Inlet and IDC is duly qualified to do business and is in
good standing in each foreign jurisdiction in which it is required to be so
qualified other than any failure to be so qualified that would not have a
material adverse effect on the business, assets (including intangible
assets), financial condition or results of operations or prospects of Inlet
and IDC, as the case may be (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). Attached hereto as EXHIBITS A AND B are true and correct copies of
IDC's Articles of Incorporation and Bylaws, respectively, each as amended to
date.
2.2 IDC CAPITAL STRUCTURE.
(a) The authorized capital stock of IDC consists solely of
20,000,000 shares of authorized common stock, of which 10,000 shares are
issued and outstanding and held of record by Inlet. The IDC Stock is duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws
of IDC or any agreement to which either IDC or Inlet is a party or by which
either IDC or Inlet is bound.
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(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which either IDC or Inlet or
any shareholder of Inlet is a party or by which either IDC or Inlet is bound
obligating either IDC or Inlet to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares
of the capital stock of IDC. Other than this Agreement, the IDC Stock is not
subject to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of the IDC Stock.
(c) IDC is not, nor has it agreed to become, a member of any joint
venture, consortium, partnership or other unincorporated association; and IDC
is not, nor has it agreed to become, a party to any agreement or arrangement
for participating with others in any business sharing commissions or other
income.
2.3 AUTHORITY. Each of Inlet and IDC has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of both IDC and
Inlet. Inlet's and IDC's Boards of Directors have approved the Merger and
this Agreement. This Agreement has been duly executed and delivered each of
by Inlet and IDC and constitutes the valid and binding obligation of it,
enforceable in accordance with its terms. The execution and delivery of this
Agreement by each of Inlet and IDC does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation, modification or
acceleration of any material obligation or loss of any material benefit under
(any such event, a "CONFLICT") (i) any provision of the Articles of
Incorporation or Bylaws of either Inlet or IDC or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to either of Inlet or IDC or any of
the properties or assets of Inlet or IDC. No consent, waiver, approval,
order or authorization of, or registration, declaration or filing with any
court, administrative agency or commission or other federal, state, county,
local or foreign governmental authority, instrumentality, agency or
commission ("GOVERNMENTAL ENTITY") or any third party, including a party to
any agreement with either Inlet or IDC (so as not to trigger any Conflict) is
required by or with respect to either Inlet or IDC in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for those consents that have been
previously obtained and are listed on the Inlet Disclosure Schedule.
2.4 IDC LIMITED PURPOSE REPRESENTATIONS. Except as set forth in the
Inlet Disclosure Schedule, IDC has no assets (other than the Internet
Technologies and its rights under this Agreement and the Consulting
Agreement) and no liabilities (other than its obligations under this
Agreement and the Consulting Agreement). Specifically, and except as
reflected in the Inlet Disclosure Schedule:
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(a) NO LIABILITIES. IDC does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement
of any type, whether accrued, absolute, contingent, matured, unmatured or
other.
(b) RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which Inlet or IDC is a party or otherwise binding upon IDC which has or
reasonably could be expected to have the effect of prohibiting or impairing
any business practice of IDC, any acquisition of property (tangible or
intangible) by IDC or the conduct of the business by IDC. All statutory and
other licenses, consents, permits and authorities necessary or desirable for
IDC's ownership of its assets or the carrying on of its business as now
carried on have been obtained and are valid and subsisting and all conditions
applicable to any such license, consent, permit or authority have been
complied with and none of such licenses, consents, permits or authorities
have been breached or is likely to be suspended, canceled, refused or
revoked. Without limiting the foregoing, except as set forth in the Inlet
Disclosure Schedule, neither IDC nor Inlet has entered into any agreement
under which IDC is restricted from selling, licensing or otherwise
distributing any of its current, planned or proposed products or services to
any class of customers, in any geographic area, during any period of time or
in any segment of the market.
(c) TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES. Other
than by virtue of its ownership of the IDC Stock, the OEM Agreement and the
Consulting Agreement, Inlet does not own any assets or rights related to the
Internet Technology. IDC has good and valid title to all its assets
(including the Internet Technology) free and clear of any Liens, except as
reflected on the Inlet Disclosure Schedule and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present
use, of the property subject thereto or affected thereby.
(d) AGREEMENTS, CONTRACTS AND COMMITMENTS. Other than this
Agreement, the OEM Agreement, the Consulting Agreement and any other
agreements, contracts or commitments that involve, in the aggregate less than
$10,000, IDC does not have, is not a party to nor is it bound by any
agreement, contract or commitment, including:
(i) any fidelity or surety bond or completion bond and any
agreement of indemnification or guaranty,
(ii) any leases of personal property,
(iii) any agreements, contracts or commitments relating to
capital expenditures,
(iv) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise, or
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(v) any management, employment, severance, consulting,
relocation, repatriation, expatriation, visas, work permit or similar
agreement or contract between IDC or any affiliate thereof and any consultant
or any current, former, or retired employee, officer, or director of IDC or
any affiliate thereof.
IDC has not materially breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment to which it is bound
(including those set forth in any of the Inlet Disclosure Schedules) (any
such agreement, contract or commitment, a "CONTRACT"). Each Contract is in
full force and effect and is not subject to any default thereunder of which
either Inlet or IDC has knowledge by any party obligated to IDC pursuant
thereto.
2.5 INTELLECTUAL PROPERTY.
(a) IDC is the sole and exclusive owner, with all right, title and
interest in and to (free and clear of any Liens), or has a right to use (and
is not contractually obligated to pay any compensation to any third party in
respect thereof), the patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both
source code and object code form), and tangible or intangible proprietary
information or material that are used in or necessary or material to IDC's
ownership of the Internet Technologies and the conduct of its business as
currently conducted or proposed to be conducted (the "IDC INTELLECTUAL
PROPERTY RIGHTS" and each an "IDC INTELLECTUAL PROPERTY RIGHT").
(b) The Inlet Disclosure Schedule sets forth a complete list of
all patents, registered and material unregistered trademarks, registered
copyrights, trade names and service marks, and any applications therefor,
included in IDC Intellectual Property Rights, and specifies, where
applicable, the jurisdictions in which each such IDC Intellectual Property
Right has been issued or registered or in which an application for such
issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners.
(c) Except as set forth in the Inlet Disclosure Schedule, no
claims with respect to IDC Intellectual Property Rights have been asserted or
are threatened by any person, nor, to the best knowledge of either Inlet or
IDC, are there any valid grounds for any BONA FIDE claims, (i) to the effect
that the manufacture, sale, licensing or use of any of the products of IDC
infringes on any copyright, patent, trade ▇▇▇▇, service ▇▇▇▇, trade secret or
other proprietary right of others, (ii) against the use by IDC of any
trademarks, service marks, trade names, trade secrets, copyrights, maskworks,
patents, technology, know-how or computer software programs and applications
relating to the Internet Technology as currently used or as proposed to be
used by IDC, or (iii) challenging the ownership by IDC or the validity or
effectiveness of any of the IDC Intellectual Property Rights. All registered
trademarks, service marks and copyrights held by IDC are valid. To the best
knowledge of each of Inlet and IDC, except as set forth in the Inlet
Disclosure Schedule, IDC has not
-7-
infringed, and the business as currently conducted or as proposed to be
conducted does not infringe, any copyright, patent, trademark, service ▇▇▇▇,
trade secret or other proprietary right of any third party. To the best
knowledge of each of Inlet and IDC, except as set forth in the Inlet
Disclosure Schedule, there is no material unauthorized use, infringement or
misappropriation of any of the IDC Intellectual Property Rights by any third
party, including any employee or former employee of either Inlet or IDC. No
IDC Intellectual Property Right or product of IDC is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by IDC.
(d) Each employee, consultant or contractor of either Inlet or
IDC given access to proprietary and confidential information of IDC has
executed a proprietary information and confidentiality agreement
substantially in either of Inlet's or IDC's standard forms. All software
included in the IDC Intellectual Property Rights is either commercially
available software subject to shrinkwrap license or original with IDC and has
been either created by employees of IDC on a work-for-hire basis or by
consultants or contractors who have created such software themselves and have
assigned all rights they may have had in such software to IDC.
2.6 COMPLIANCE WITH LAWS. IDC and Inlet have complied in all material
respects with, is not in material violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation.
2.7 LITIGATION. There is no action, suit or proceeding of any nature
pending or, to the knowledge of Inlet, threatened against Inlet (as it
relates to the Internet Technologies) or IDC, its properties or any of its
officers or directors (in their respective capacities as such). There is no
investigation pending or threatened against any of Inlet (as it relates to
the Internet Technologies) or IDC, its properties or any of its officers or
directors by or before any governmental entity. The Inlet Disclosure
Schedule sets forth, with respect to any pending or threatened action, suit,
proceeding or investigation, the forum, the parties thereto, the subject
matter thereof and the amount of damages claimed or other remedy requested.
No governmental entity has at any time challenged or questioned the legal
right of Inlet (as it relates to the Internet Technologies) or IDC to
manufacture, offer or sell any of its products in the present manner or style
thereof. The Inlet Disclosure Schedule also lists all suits and legal
actions initiated by either Inlet or IDC related to the business or assets of
IDC.
2.8 INSURANCE. The Internet Technologies are insured for Inlet's
benefit and will be so insured through the Closing. All such policies
currently in effect are in full force and effect.
2.9 MINUTE BOOKS. The minute books of IDC made available to counsel
for DeltaPoint are the only minute books of IDC and contain an accurate
summary of all meetings of directors (or committees thereof) and shareholders
or actions by written consent since the time of incorporation of IDC.
2.10 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Neither Inlet
nor IDC has incurred, or will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions
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or any similar charges in connection with this Agreement or any transaction
contemplated hereby. Inlet agrees to indemnify DeltaPoint for all third
party expenses incurred by each of Inlet and IDC in connection with the
negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby.
2.11 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES", means any and all taxes, assessments and
other governmental charges, duties, impositions and liabilities imposed by
any governmental entity, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangement with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) As of the Closing, IDC and any affiliated group (within
the meaning of Section 1504 of the Code) of which IDC is or has been a
member, will have prepared and filed all required federal, state, local and
foreign returns, estimates, information statements and reports ("RETURNS")
relating to any and all Taxes concerning or attributable to IDC or its
operations and such Returns are true and correct in all material respects and
have been completed in all material respects in accordance with applicable
law.
(ii) IDC has (A) paid or accrued all Taxes it is required to
have paid or accrued and (B) withheld with respect to its employees all
federal and state income Taxes, The Federal Insurance Contribution Act
("FICA"), the Federal Unemployment Tax Act ("FUTA") and other Taxes required
to have been withheld.
(iii) IDC has not been delinquent in the payment of any Tax
nor is there any tax deficiency outstanding, proposed or assessed against
IDC, nor has IDC executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of IDC is
currently in progress, nor has IDC been notified of any request for such an
audit or other examination.
(v) IDC does not have any liabilities for unpaid federal,
state, local or foreign Taxes, which have not been accrued or reserved
against on the financial statements of IDC and neither Inlet nor IDC has any
knowledge of any basis for the assertion of any such liability attributable
to IDC, its assets or operations.
-9-
(vi) Inlet has provided to DeltaPoint copies of all federal
and state income and all state sales and use Tax Returns for all periods
since the date of IDC's incorporation, if any.
(vii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("LIENS") on the assets of IDC relating to or
attributable to taxes.
(viii) Neither Inlet nor IDC has any knowledge of any basis
for the assertion of any claim relating or attributable to taxes which, if
adversely determined, would result in any material (individually or in the
aggregate) Lien on the assets of IDC.
(ix) None of IDC's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including, but not limited to, the provisions
of this Agreement, covering any employee or former employee of IDC that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G or 162 of the Code.
(xi) IDC has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by IDC.
(xii) IDC is not a party to a tax sharing or allocation
agreement nor does IDC owe any amount under any such agreement.
(xiii) IDC is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) IDC's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on IDC's tax books and records.
(xv) IDC is not a party to any tax exemption agreements in
any jurisdiction, including the nature, amount and lengths of such tax
exemption arrangement. IDC is in full compliance with all terms and
conditions of any such tax exemption agreements or order of any Governmental
Entity and the consummation of the transactions contemplated hereby will not
have any adverse effect on the validity and effectiveness of any such tax
exemption or order.
2.12 EMPLOYEE MATTERS AND BENEFIT PLANS.
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(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.12(a)(i) below (which definition shall
apply only to this Section 2.12), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with IDC within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded
or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by IDC or any Affiliate for
the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of IDC or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between IDC or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company
Employee Plan that has been adopted or maintained by IDC or any Affiliate,
whether informally or formally, for the benefit of Employees outside the
United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA;
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(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "PENSION PLAN" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(b) SCHEDULE. Schedule 2.12(b) contains an accurate and complete
list of each Company Employee Plan and each such Employee Agreement, together
with a schedule of all liabilities, whether or not accrued, under each Company
Employee Plan or Employee Agreement. IDC does not have any plan or commitment
to establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
DeltaPoint in writing, or as required by this Agreement), or to enter into any
Company Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) DOCUMENTS. Inlet has provided to DeltaPoint or its counsel:
(i) correct and complete copies of all documents embodying each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iv) if the Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the
summary of material modifications thereto, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to IDC; (ix) all COBRA forms and related notices; and (x) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on
Schedule 2.12(d), (i) IDC has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination,
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opinion, notification or advisory letter from the IRS with respect to each
such Plan as to its qualified status under the Code, including all amendments
to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and
make any amendments necessary to obtain a favorable determination as to the
qualified status of each such Company Employee Plan; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406
and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has
occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Inlet, threatened
or reasonably anticipated (other than routine claims for benefits) against
any Company Employee Plan or against the assets of any Company Employee Plan;
(v) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without
liability to DeltaPoint, IDC or any of its Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (vi)
there are no audits, inquiries or proceedings pending or, to the knowledge of
Inlet or any Affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vii) neither IDC nor any Affiliate is subject to
any penalty or tax with respect to any Company Employee Plan under Section
402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) PENSION PLANS. Neither IDC nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has IDC or any Affiliate
contributed to or been requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.12(g), no Company Employee Plan provides, or has any liability to
provide, retiree life insurance, retiree health or other retiree employee
welfare benefits to any person for any reason, except as may be required by
COBRA or other applicable statute, and IDC has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute.
(h) COBRA. Neither IDC nor any Affiliate has, prior to the Closing
and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 2.12(i), the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company
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Employee Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.12(i), no payment or
benefit which will or may be made by IDC or its Affiliates with respect to any
Employee as a result of the transactions contemplated by this Agreement will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(j) EMPLOYMENT MATTERS. IDC: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to Employees; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
threatened or reasonably anticipated claims or actions against IDC under any
worker's compensation policy or long-term disability policy.
(k) LABOR. No work stoppage or labor strike against IDC is pending,
threatened or reasonably anticipated. IDC does not know of any activities or
proceedings of any labor union to organize any Employees. Except as set forth
in Schedule 2.12(k), there are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of Inlet, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Employee, including, without limitation, charges of unfair labor practices
or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to IDC.
Neither IDC nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Except as set
forth in Schedule 2.12(k), IDC is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by IDC.
(l) INTERNATIONAL EMPLOYEE PLAN. Each International Employee Plan
has been established, maintained and administered in compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Closing, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent IDC or DeltaPoint from
terminating or amending any International Employee Plan at any time for any
reason.
2.13 INVESTMENT MATTERS. Inlet has sufficient knowledge and experience in
business and financial matters so as to enable it to analyze and evaluate the
merits and risks associated with
-14-
acquiring the DeltaPoint Common Stock. Inlet is acquiring the DeltaPoint
Common Stock for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any distribution
thereof.
2.14 CONTINUITY OF INTEREST. Inlet is under no obligation and has no
current plan or intention to engage in a sale, exchange, transfer, distribution
(including a distribution to shareholders), redemption or reduction in any way
of Inlet's risk of ownership by short sale or otherwise of any of the shares of
DeltaPoint Common Stock to be received in the Merger.
2.15 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Inlet or IDC (as modified by the Inlet Disclosure Schedule), nor any
written statement made in any schedule or certificate furnished by Inlet or IDC
pursuant to this Agreement, contains any untrue statement of a material fact, or
omits to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DELTAPOINT
AND MERGER SUB
Each of DeltaPoint and Merger Sub, jointly and severally, represents and
warrants to IDC and Inlet, subject to such exceptions (referencing the
appropriate section number) as are specifically disclosed in the DeltaPoint
Disclosure Schedule provided to Inlet on the date hereof (the "DELTAPOINT
DISCLOSURE SCHEDULE"), as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of DeltaPoint and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its organization. Each of DeltaPoint and Merger Sub has the corporate
power to own its properties and to carry on its business as now being conducted
and as proposed to be conducted by it. Each of DeltaPoint and Merger Sub is
duly qualified to do business and is in good standing in each foreign
jurisdiction in which it is required to be so qualified other than any such
failure which would not have a Material Adverse Effect.
3.2 AUTHORITY. Each of DeltaPoint and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of DeltaPoint and
Merger Sub. This Agreement has been duly executed and delivered by DeltaPoint
and Merger Sub and constitutes the valid and binding obligation thereof,
enforceable in accordance with its terms. The execution and delivery of this
Agreement by DeltaPoint and Merger Sub does not, and the performance by
DeltaPoint and Merger Sub of its obligations hereunder will not, conflict with
(i) any provision of the Articles of Incorporation or Bylaws of DeltaPoint or
Merger Sub, as the case may
-15-
be, or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to DeltaPoint or
Merger Sub., as the case may be, or its properties or assets, except where
such conflict would not have a Material Adverse Effect. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
(the lack of which would have a Material Adverse Effect) with any
Governmental Entity or any third party is required by or with respect to
DeltaPoint or Merger Sub in connection with the execution and delivery of
this Agreement or the performance by DeltaPoint or Merger Sub of their
respective obligations hereunder, except for those obtained prior to the
Closing.
3.3 SEC DOCUMENTS; DELTAPOINT FINANCIAL STATEMENTS. DeltaPoint has
furnished or made available to IDC and Inlet true and complete copies of all
reports or registration statements filed by it with the U.S. Securities and
Exchange Commission (the "SEC") since June 1, 1997, all in the form so filed
(all of the foregoing being collectively referred to as the "SEC DOCUMENTS").
As of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a document subsequently filed with the SEC. The financial
statements of DeltaPoint, including the notes thereto, included in the SEC
Documents (the "DELTAPOINT FINANCIAL STATEMENTS") comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) and present fairly the consolidated financial position of DeltaPoint
at the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal audit adjustments).
3.4 NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet
included in DeltaPoint's most recently filed report on Form 10-K or ▇▇-▇,
▇▇▇▇▇▇▇▇▇▇ has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial condition,
liabilities, assets or business of DeltaPoint and its subsidiaries, taken as a
whole; (b) any amendment or change in the Articles of Incorporation or Bylaws of
DeltaPoint (other than restatements of the Articles or Incorporation which did
not require shareholders' approval); or (c) any damage to, destruction or loss
of any assets of DeltaPoint, (whether or not covered by insurance) that
materially and adversely affects the financial condition or business of
DeltaPoint and its subsidiaries, taken as a whole.
3.5 LITIGATION. To our knowledge, there is no action, suit, proceeding,
claim, arbitration or investigation threatened against DeltaPoint or any of the
properties or assets owned by DeltaPoint, or pending as to which DeltaPoint has
received any notice of assertion, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
-16-
by this Agreement or, if adversely determined, is reasonably likely to have a
Material Adverse Effect on DeltaPoint or requires reporting by DeltaPoint on
reports filed or to be filed with the SEC.
3.6 BROKERS AND FINDERS' FEES. DeltaPoint has not incurred, nor will
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.7 SECURITIES LAW COMPLIANCE; DUE ISSUANCE; RULE 144 REPORTING.
(a) The issuance of the shares of DeltaPoint Common Stock pursuant to
this Agreement are transactions exempt from the registration provisions under
the Securities Act of 1933, as amended, and applicable state securities laws.
Upon issuance of the DeltaPoint Common Stock to be issued hereunder in
accordance with the terms of this Agreement, such shares shall be duly
authorized, validly issued, fully paid and non-assessable by DeltaPoint and not
subject to preemptive rights created by statute, DeltaPoint's Articles of
Incorporation or Bylaws or any agreement to which DeltaPoint is a party or by
which it is bound.
(b) Inlet understands that the DeltaPoint Common Stock to be received
by Inlet is characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from DeltaPoint in a
transaction not involving a public offering, and that under such laws and
applicable regulations such DeltaPoint Common Stock may be resold without
registration under the Securites Act only in certain limited circumstances.
With a view to making available the benefits of certain rules and regulations of
the SEC which may at any time permit the sale of the DeltaPoint Common Stock to
the public without registration, DeltaPoint agrees to use its best efforts to:
(i) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act at all times;
and
(ii) File with the SEC in a timely manner all reports and other
documents required of DeltaPoint under the Securities Act and the Securities
Exchange Act of 1934, as amended.
3.8 CAPITAL STOCK OF DELTAPOINT AND MERGER SUB. The description of
capital stock of DeltaPoint set forth in DeltaPoint's Registration Statement on
Form S-1 dated October 7, 1997 is true and correct as of such date. At the
Closing, the authorized capital stock of Merger Sub will consist of 1,000 shares
of Common Stock, 100 of which shares as of the date hereof are validly issued,
fully paid and non-assessable, and are owned by DeltaPoint free and clear of all
liens and encumbrances.
3.9 REORGANIZATION REPRESENTATIONS. Prior to the Merger, DeltaPoint will
be in control of Merger Sub within the meaning of Section 368(c) of the Code.
Following the Merger, Merger Sub will not issue additional shares of its stock
that would result in DeltaPoint losing control of Merger Sub within the meaning
of Section 368(c) of the Code. DeltaPoint has no plan or intention to reacquire
any of its stock issued in the Merger. DeltaPoint has no plan or intention to
liquidate
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Merger Sub; to merge Merger Sub with and into another corporation; to sell or
otherwise dispose of the stock of Merger Sub; or to cause Merger Sub to sell
or otherwise dispose of any of its assets or any of the assets of IDC
acquired in the Merger, except for dispositions made in the ordinary course
of business or transfers described in Section 368(a)(2)(c) of the Code.
Following the Merger, Merger Sub will continue the historic business of IDC
or use a significant portion of IDC's historic business assets in a business.
DeltaPoint and Merger Sub will pay their respective expenses, if any,
incurred in connection with the Merger. No two (2) parties to the
transaction are investment companies as defined in Section 368A(a)(2)(F)(iii)
and (iv) of the Code. No stock of Merger Sub will be issued in the Merger.
3.10 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by DeltaPoint and Merger Sub (as modified by the DeltaPoint Disclosure
Schedule), nor any written statement made in any schedule or certificate
furnished by DeltaPoint or Merger Sub pursuant to this Agreement, contains any
untrue statement of material fact, or omits to state any material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which made, not misleading.
ARTICLE IV
COVENANTS
4.1 CONDUCT OF BUSINESS.
(a) CONDUCT. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Closing, Inlet shall cause IDC (except to the extent that DeltaPoint shall
otherwise consent in writing) to conduct its business in the ordinary course of
business consistent with past practice (and consistent with IDC's limited
purpose of owning the Internet Technology), to pay all taxes and other
liabilities as they come due and to use all reasonable efforts to preserve
intact its present business organization. Inlet shall promptly notify
DeltaPoint of any event or occurrence or emergency not in the ordinary course of
business, and any material event involving or adversely affecting IDC or the
Internet Technology. Without limiting the generality of the foregoing, except
as expressly contemplated by this Agreement, IDC will not, and Inlet will take
all action to ensure that IDC will not, without the prior written consent of
DeltaPoint:
(i) own any assets other than the Internet Technology and the
assets owned as of the date of this Agreement;
(ii) incur any material liability or grant any lien on its
assets;
(iii) transfer to any person or entity any rights to any IDC
Intellectual Property Rights;
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(iv) enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of IDC;
(v) amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Inlet Disclosure Schedule;
(vi) commence any litigation;
(vii) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of IDC, or repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock (or
options, warrants or other rights exercisable therefor);
(viii) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(ix) cause or permit to be made any amendments to its Articles of
Incorporation or Bylaws;
(x) acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to its
business;
(xi) sell, lease, license or otherwise dispose of any of its
properties or assets;
(xii) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of IDC or guarantee any
debt securities of others;
(xiii) hire any employee or consultant or grant any severance or
termination pay to any director, officer employee or consultant;
(xiv) adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment offer,
pay or agree to
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pay any special bonus or special remuneration to any director, employee or
consultant, or increase the salaries or wage rates of its employees;
(xv) revalue any of its assets;
(xvi) pay, discharge or satisfy, in an amount in excess of $5,000,
in any one case, or $10,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Inlet Disclosure
Schedule;
(xvii) make or change any material election in respect of taxes,
adopt or change any accounting method in respect of taxes, enter into any
closing agreement, settle any claim or assessment in respect of taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of taxes;
(xviii) enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(xix) fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(xx) waive or commit to waive any rights with a value in excess
of $5,000, in any one case, or $10,000, in the aggregate;
(xxi) cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(xxii) alter, or enter into any commitment to alter, its interest
in any corporation, association, joint venture, partnership or business entity
in which IDC directly or indirectly holds any interest on the date hereof; or
(xxiii) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a)(i) through (xxii) above, or any other
action that would prevent Inlet or IDC from performing, or cause Inlet or IDC
not to perform, its covenants hereunder.
(b) NOTIFICATION. Inlet shall promptly notify DeltaPoint of any
event or occurrence which is not in the ordinary course of business of IDC or
which is material and adverse to the use of the Internet Technology.
4.2 NO SOLICITATION. Until the earlier of the Closing and the date of
termination of this Agreement, Inlet will not (nor will Inlet permit any of
IDC's officers, directors, shareholders, agents, representatives or affiliates
to) directly or indirectly, take any of the following actions with any party
other than DeltaPoint and its designees: (a) solicit, initiate, entertain, or
encourage any proposals or
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offers from, or conduct discussions with or engage in negotiations
with, any person relating to any possible acquisition of IDC (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise), or
any material portion of its capital stock or assets or any equity interest in
IDC, (b) provide information with respect to it to any person, other than
DeltaPoint, relating to, or otherwise cooperate with, facilitate or encourage
any effort or attempt by any such person with regard to, any possible
acquisition of IDC (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), or any material portion of its capital
stock or assets or any equity interest in IDC, (c) enter into an agreement
with any person, other than DeltaPoint, providing for the acquisition of IDC
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), or any material portion of its capital stock or assets or any
equity interest in IDC, or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of IDC
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), or any material portion of its capital stock or assets or any
equity interest in IDC by any person, other than by DeltaPoint. IDC shall,
and Inlet will take all action to ensure that IDC will, immediately cease and
cause to be terminated any such contacts or negotiations with third parties
relating to any such transaction or proposed transaction. In addition to the
foregoing, if Inlet or IDC receives prior to the Closing or the termination
of this Agreement any offer or proposal relating to any of the above, Inlet
will immediately notify DeltaPoint thereof, including information as to the
identity of the offeror or the party making any such offer or proposal and
the specific terms of such offer or proposal, as the case may be, and such
other information related thereto as DeltaPoint may reasonably request.
Except as contemplated by this Agreement or as required by law, disclosure by
Inlet or IDC of the terms of this Agreement to anyone not already having
knowledge of such terms (other than the prohibition of this section) shall be
deemed to be a violation of this Section 4.2.
4.3 NO ENCUMBRANCE. Until the earlier of the Closing or the date of
termination of this Agreement, Inlet will not (nor will Inlet permit IDC or any
of IDC's officers, directors, agents, representatives or affiliates to),
directly or indirectly, take any action which could in any way and at any time
impair Inlet's good and valid title to the IDC Stock or could cause or lead to
the creation of any lien, claim, charge, pledge, security interest, option, or
other legal or equitable encumbrance with regard to any share or shares of the
IDC Stock.
4.4 EXPENSES. Each of Inlet and DeltaPoint shall pay its own respective
fees and expenses incurred in connection with the Merger, except as otherwise
contemplated in this Agreement.
4.5 NON-COMPETITION AND NON-SOLICITATION AGREEMENTS. Concurrent with
the execution and delivery of this Agreement, Merger Sub and each of ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and Inlet, Inc. will enter into a Non-Competition and
Non-Solicitation Agreement substantially in the form of EXHIBIT C hereto.
4.6 ROYALTY.
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(a) DeltaPoint agrees that it will use its reasonable best efforts to
make sales, license, sublicense, distribute or otherwise make disposition of the
CI Product (as defined below). After the First Customer Shipment (as defined
below), DeltaPoint will pay to Inlet royalties calculated at the rate of 5% of
Net Revenues (as defined below), if any, received by DeltaPoint for units of
CurrentIssue or successor products that include, or are based upon, fifty
percent (50%) or more of the form of CurrentIssue software code delivered to
DeltaPoint at the Closing (the "CI Product") sold, licensed, sublicensed or
distributed by DeltaPoint, any transferee of the rights to CurrentIssue or any
of their related or affiliated entities to unaffiliated third parties; PROVIDED,
HOWEVER, that the foregoing royalty obligation shall terminate once Inlet has
received aggregate royalty payments of $4,000,000, in cash or its equivalent,
under the foregoing provisions. For purpose of this Section 4.6, the term
"FIRST CUSTOMER SHIPMENT" shall mean the first commercial shipment of the CI
Product by DeltaPoint or its agents or customers to any retail distributor or
other customer that is paying a license fee or purchase price therefor, and is
not an alpha or beta site evaluation customer of such product. For the purpose
of this Section 4.6, the term "NET REVENUES" shall mean actual cash receipts
less taxes (other than income taxes), duties, excises, other governmental
charges and fees of any kind and less refunds, credits and returns.
(b) Any royalty payment owed to Inlet pursuant to 4.6(a) shall be
paid to Inlet within forty-five (45) days after the end of each fiscal quarter
and DeltaPoint shall deliver to Inlet a good faith calculation setting forth in
reasonable detail the amount of the royalty payment made pursuant to Section
4.6(a). In the event that Inlet shall in good faith dispute the amount of such
payment, the parties shall hire an independent auditor to determine the
appropriate amount of the royalty payment. If the audit reveals that DeltaPoint
has underpaid Inlet on any quarterly payment date by an amount equal to the
greater of $1000 or five percent (5%) of the amount owed to Inlet on such date,
DeltaPoint shall pay the amount due within ten (10) days of the completion of
the audit and shall pay for the cost of the audit. If such audit does not
reveal that DeltaPoint underpaid Inlet by an amount equal to the greater of
$1000 or five percent (5%) of the amount owed to Inlet on such quarterly payment
date, Inlet shall pay for the cost of the audit and DeltaPoint shall not be
required to make any payments to Inlet or otherwise pursuant to such audit.
(c) Fifty percent (50%) of each payment made by DeltaPoint to Inlet
pursuant to this Section 4.6 shall be made in DeltaPoint's Common Stock, valued
at the average closing price of such Common Stock over the ten (10) days
preceding each such payment or payments, as the case may be.
4.7 PUBLICITY. Except as contemplated by this Agreement and unless
otherwise required by law, the Nasdaq Stock Market or the Pacific Stock
Exchange, no press release or other publicity relating to the transactions
contemplated hereunder will be made by any party hereto without the prior
consent of the other party, which consent shall not be unreasonably withheld.
4.8 LICENSE. DeltaPoint grants to Inlet, effective as of the Closing, a
perpetual site license for the CI Product solely for Inlet's internal
development use in its consulting business; provided, that Inlet agrees that
such license shall not be used by any party for the development and distribution
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of web site creation and management tools; provided, further, that such
license shall be subject to the terms and conditions of the Non-Competition
and Non-Solicitation Agreement to be executed and delivered by, among others,
Inlet at the Closing, regardless of the term of any such Non-Competition and
Non-Solicitation Agreement.
4.9 TERMINATION OF CONSULTING AND OEM AGREEMENT. Other than any unpaid
monetary obligation due thereunder and notwithstanding the other provisions
thereof, the OEM Agreement and the Consulting Agreement entered into pending the
consummation of this Agreement shall automatically terminate upon the Closing.
4.10 FURTHER ASSURANCES. At any time or from time to time after the
Closing, IDC and Inlet, as the case may be, agree to undertake all lawful
action(s) reasonably requested by DeltaPoint to more effectively transfer and
assign to, and vest in, DeltaPoint the Internet Technology.
4.11 LIABILITY FOR TAXES; TAX RETURNS. Inlet shall be liable, and
indemnify DeltaPoint, for all income Taxes imposed onIDC for any taxable year or
period ending on or prior to the Closing Date, including any Taxes imposed
pursuant to an audit, administrative or court proceeding, or the filing of an
amended return.
4.12 COOPERATION AND CONTEST PROVISIONS. DeltaPoint shall notify Inlet of
any pending or threatened federal, state, local or foreign Tax audits,
examinations or assessments which may affect any Tax liability for which Inlet
is liable pursuant to Section 4.11. Inlet shall have the sole right to conduct
any Tax audit or administrative or court proceeding relating to a potential
liability for such Taxes and shall bear all costs and expenses of such audit or
examination. DeltaPoint shall not settle any Tax claim for which Inlet may be
liable under Section 4.11 without the prior written consent of Inlet, which
consent shall not be unreasonably withheld. Any refund of Taxes of the type for
which Inlet has responsibility under Section 4.11 shall be the property of Inlet
and paid over to Inlet immediately upon receipt by DeltaPoint. DeltaPoint shall
not, and shall not permit any of its affiliates to, file any amended income Tax
return, report or election statement with respect to any year or period for
which Inlet has liability under Section 4.11, unless Inlet consents to such
filing.
4.13 FURTHER ACTION; TAX TREATMENT.
(a) The parties intend the Merger to qualify as a reorganization
under Section 368(a) of the Code. Each party and its affiliates shall use
reasonable best efforts to cause the Merger to so qualify, and shall comply with
the reporting requirements under Treas. Reg. Section 1.368-3.
(b) In the event of the issuance of final or temporary Treasury
regulations relating to the continuity of shareholder interest (proposed
regulations were issued in the Federal Register on December 23, 1996, which
would, among other things, add a new Treas. Reg. Section 1.368-1(e) to existing
regulations), the parties agree to use their reasonable best efforts to take
advantage of, and comply with, any provisions therein (such as an election
and/or reporting requirements) to the extent necessary to cause such regulations
to apply to the Merger.
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ARTICLE V
CONDITIONS TO THE CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF INLET. The obligations of Inlet and IDC
to consummate the transactions contemplated by this Agreement will be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which (except Section 5.1(e)) may be waived by Inlet and IDC:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of DeltaPoint and Merger Sub contained in this Agreement will be true
and correct in all material respects on and as of the Closing, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which will remain
true and correct as of such date), with the same force and effect as if made on
and as of the Closing.
(b) AGREEMENTS AND COVENANTS. DeltaPoint will have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the purchase and sale of the IDC
Stock contemplated hereby will be in effect.
(d) MATERIAL ADVERSE CHANGE. There will not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition, results of operations or prospects of DeltaPoint since the
date of this Agreement.
(e) PERPETUAL SITE LICENSE. DeltaPoint will have granted the
perpetual site license for the CI Product contemplated by Section 4.8 herein.
(f) OPINION OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.. Inlet shall
have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to
DeltaPoint, an opinion of counsel in form and substance satisfactory to Inlet
and its counsel.
5.2 CONDITIONS TO THE OBLIGATIONS OF DELTAPOINT. The obligations of
DeltaPoint to consummate the transactions contemplated by this Agreement will be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived in writing exclusively by DeltaPoint:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Inlet and IDC contained in this Agreement will be true and correct
in all material respects on and as of the
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Closing, except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which will remain true and correct as of such date), with
the same force and effect as if made on and as of the Closing.
(b) AGREEMENTS AND COVENANTS. Inlet and IDC will have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing.
(c) CONSENTS. DeltaPoint will have been furnished with evidence
satisfactory to it that DeltaPoint, Inlet, or IDC, as the case may be, has
obtained (x) all required government consents and approvals required for
securing for DeltaPoint all rights in and to the IDC Stock, free of any
condition imposed in respect of any such consent or approval and (y) the
consents, approvals and waivers set forth in Schedule 2.4.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the purchase and sale of the IDC
Stock contemplated hereby will be in effect.
(e) MATERIAL ADVERSE CHANGE. There will not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition, results of operations or prospects of Inlet (as it relates
to the Internet Technology) or IDC since the date of this Agreement.
(f) NON-COMPETITION AND NON-SOLICITATION AGREEMENTS. Each of ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and Inlet, Inc. will have executed and delivered to
DeltaPoint a Non-Competition and Non-Solicitation Agreement in substantially the
form of EXHIBIT C and each such Agreement will be in full force and effect.
(g) OPINION OF COUNSEL. DeltaPoint shall have received from
▇▇▇▇▇▇▇▇▇▇▇▇ & Ingersoll, P.C., counsel to Inlet, an opinion of counsel in form
and substance satisfactory to DeltaPoint and its counsel.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties and covenants (except for those covenants in
Sections 3.7(b), 4.6, 4.8, 4.10 and 4.13) in this Agreement of all parties
hereto shall survive the Closing and continue until 5:00 p.m., California time,
on the first anniversary of the date of this Agreement (except that any
representation or warranty in respect of Taxes shall survive until the tolling
of the applicable statute of limitations).
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6.2 INDEMNIFICATION OF DELTAPOINT. Inlet agrees to indemnify and hold
harmless each of DeltaPoint and its affiliates for any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense
(hereinafter individually a "LOSS" and collectively "LOSSES") incurred by
DeltaPoint or Merger Sub, their officers, directors, or affiliates directly
or indirectly as a result of (A) any inaccuracy or breach of a representation
or warranty of Inlet or IDC contained herein, (B) any failure by Inlet or IDC
to perform or comply with any covenant contained herein or (C) any Loss or
liability attributable to the activities of Inlet or IDC (including
obligations in respect of Taxes, employees and benefit plans); provided (i)
the indemnification obligation of Inlet under each of clause (A) and (C) (but
not clause (B)) of this Section 6.2 shall be limited to an amount equal to
the 360,000 shares of DeltaPoint Common Stock delivered to Inlet pursuant to
this Agreement multiplied by the closing price per share of DeltaPoint Common
Stock on the trading day preceding the Closing Date (the "Closing Date
Price") plus any cash payments payable to Inlet hereunder received or accrued
to the date of indemnification; and (ii) Inlet shall have no obligations
under this Section 6.2 until the aggregate Losses exceed $25,000, at which
time Inlet shall provide indemnification for all Losses subject to the other
limitations set forth above. There shall be no limit to the indemnification
obligation of Inlet under clause (B) of this Section 6.2. Inlet may satisfy
its indemnification obligation under this Section 6.2 in whole or part by
delivering to DeltaPoint or Merger Sub, or their affiliates, as applicable,
shares of the DeltaPoint Stock and shall be credited with respect to such
obligation based upon the Closing Date Price. As defined above, "LOSS" and
"LOSSES" shall exclude the amount of any tax benefit actually received by the
indemnified party as a result of such Losses, after taking into account the
tax consequences of any related indemnification payment made under this
Article VI in relation to such Losses. If such benefits have not yet been
actually received at the time for the payment of indemnification hereunder,
then the related Losses shall not exclude such benefit, but such benefit,
when received, shall be refunded to the indemnifying party. Other than as set
forth in this Section 6.2, Inlet shall not have any liability or obligation
for any Losses to DeltaPoint, Merger Sub or their affiliates.
6.3 MATERIALITY. For the purposes of determining the amount of Losses
under this Article VI, all representations and warranties of Inlet or IDC
contained herein or in any instrument, document or agreement contemplated hereby
shall be deemed to be without any materiality or Material Adverse Effect
exceptions or qualifications or any similar exceptions or qualifications that
may be present in such representations and warranties.
6.4 PROCEDURE FOR INDEMNIFICATION. In the event that any party hereto
shall incur any Loss or Losses in respect of which indemnity may be sought by
such party pursuant to this Article VI, the party from whom such indemnity may
be sought ("Indemnifying Party") shall be given written notice thereof by the
party seeking such indemnity ("Indemnified Party"), which notice shall specify
the amount and nature of such Loss or Losses and include the request of the
Indemnified Party for indemnification of such amount. If the Indemnifying Party
wishes to defend any claim for any Loss or Losses for which such Indemnifying
Party is or may be liable, and such Indemnifying Party first acknowledges
liability and establishes (to the reasonable satisfaction of the Indemnified
Party) the
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Indemnifying Party's financial ability to pay for any such Loss or
Losses, then such Indemnifying Party may, at its own expense, defend such claim;
provided that the Indemnified Party may retain counsel (at the Indemnified
Party's expense) to monitor the defense of such claim, and may take over such
defense (at the Indemnifying Party's expense) if, during the course thereof, it
reasonably appears that the Indemnifying Party has lost its ability to pay for
any Loss or Losses threatened by such claim.
Amounts payable by the Indemnifying Party to the Indemnified Part in
respect of any Loss or Losses for which any party is entitled to indemnification
hereunder, shall be payable by the Indemnifying Party as incurred by the
Indemnified Party upon the final determination, either by mutual agreement of
the parties hereto or pursuant to the final judgment of a court of competent
jurisdiction.
6.5 THIRD-PARTY CLAIMS. In the event DeltaPoint becomes aware of a
third-party claim which DeltaPoint believes may result in Losses, DeltaPoint
shall notify Inlet of such claim, and Inlet shall be entitled, at its own
expense, to participate in any defense of such claim. DeltaPoint shall have
the right in its sole discretion, using reasonable business judgment, to
settle any such claim; provided, however, that except with the consent of
Inlet, the amount of the settlement of any such claim with third-party
claimants shall not be determinative of the amount of any claim under this
Article VI. In the event that Inlet has consented to any such settlement,
Inlet shall have no power or authority to object under any provision of this
Agreement to the amount of any claim by DeltaPoint under this Article VI with
respect to such settlement to the extent that such amount is consistent with
the terms of such settlement.
6.6 INDEMNIFICATION OF INLET. DeltaPoint agrees to indemnify and hold
harmless Inlet for any Losses incurred by it directly or indirectly as a result
of (A) any inaccuracy or breach of a representation or warranty of DeltaPoint or
Merger Sub contained herein or in any instrument, document or agreement
contemplated hereby, (B) any failure by DeltaPoint or Merger Sub to perform or
comply with any covenant contained herein or (C) any Loss or liability
attributable to activities of DeltaPoint or Merger Sub occurring after the
Closing Date; provided (i) that the indemnification obligation of DeltaPoint
under this Section 6.6 shall be limited to the sum of (x) the total cash
consideration payable, but not yet paid, to Inlet pursuant to this Agreement and
(y) the product obtained by multiplying the 360,000 shares of DeltaPoint Common
Stock to which Inlet is entitled to pursuant to this Agreement by the Closing
Date Price; and (ii) that DeltaPoint shall have no indemnification obligations
under this Section 6.6 until the aggregate Losses exceed $25,000, at which time
DeltaPoint shall indemnify for all Losses subject only to the limitations
imposed by provisions (i) and (ii) above.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
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7.1 TERMINATION. Except as provided in Section 7.2 below, this Agreement
may be terminated and the transactions contemplated hereby abandoned at any time
prior to the Closing:
(a) by mutual consent of DeltaPoint and Inlet;
(b) by DeltaPoint or Inlet if: (i) the Closing has not occurred by
December 31, 1997 (provided that the right to terminate this Agreement under
this clause 7.1(b)(i) will not be available to any party whose willful failure
to fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date); (ii) there shall be a
final nonappealable order of a federal or state court in the United States in
effect preventing consummation of the Merger or the transactions contemplated
hereby; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger contemplated hereby by
any Governmental Entity that would make consummation of the Merger illegal;
(c) by DeltaPoint if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the transactions contemplated hereby by any Governmental Entity, which would:
(i) prohibit DeltaPoint's or IDC's ownership or operation of all or a portion of
the business of IDC or the Internet Technology or (ii) compel DeltaPoint or IDC
to dispose of or hold separate all or a portion of the business or assets of
DeltaPoint or IDC (including the Internet Technology) as a result of the Merger
or the transactions contemplated hereby;
(d) by DeltaPoint if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of Inlet
and (i) such breach has not been cured within five (5) business days after
written notice to Inlet (provided that, no cure period will be required for a
breach which by its nature cannot be cured), and (ii) as a result of such breach
the conditions set forth in Section 5.2(a) or 5.2(b), as the case may be, would
not then be satisfied;
(e) by Inlet if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of DeltaPoint and
(i) such breach has not been cured within five (5) business days after written
notice to DeltaPoint (provided that, no cure period will be required for a
breach which by its nature cannot be cured), and (ii) as a result of such breach
the conditions set forth in Section 5.1(a) or 5.1(b), as the case may be, would
not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement will forthwith become void and there
will be no liability or obligation on
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the part of DeltaPoint, Inlet or IDC, or their respective officers, directors
or shareholders; PROVIDED, HOWEVER, that each party will remain liable for
any breaches of this Agreement prior to its termination; PROVIDED, FURTHER,
that the provisions of Sections 2.10, 3.6, 4.4, 4.6, 4.7 and 4.8 and Article
VII of this Agreement will remain in full force and effect and survive any
termination of this Agreement; and, PROVIDED, FURTHER, that neither Inlet nor
IDC shall be obligated to return or repay any payments made prior to the date
of termination by DeltaPoint.
7.3 EXTENSION; WAIVER. At any time prior to the Closing, DeltaPoint, on
the one hand, and Inlet, on the other, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations of the other
party hereto, (ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance with any of the agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver will be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 AMENDMENT; WAIVER. This Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on behalf of
each of the parties hereto. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
8.2 INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation" when such words are not actually used. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
8.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; (c) shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties; and
(d) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that DeltaPoint and Inlet may assign their
respective rights and delegate their respective obligations hereunder to their
respective affiliates.
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8.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect, and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.7 GOVERNING LAW; FORUM. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY A JURY IN ANY ACTION OR PROCEEDING RELATED TO OR TO ENFORCE
OR DEFEND ANY RIGHT, POWER OR REMEDY UNDER, IN RESPECT OF, RELATED TO OR
CONTEMPLATED BY THIS AGREEMENT OR ANY AMENDMENT, SUPPLEMENT, AGREEMENT,
INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION SHALL BE RESOLVED BEFORE A COURT AND
NOT A JURY.
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8.11 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
8.12 NOTICES. Any and all notices permitted or required to be given under
this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section:
If to DeltaPoint or
Merger Sub: DeltaPoint, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. Ait
Fax: (408)
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Inlet or IDC: Inlet, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
500 Firstar Bank Building
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
8.13 INDEPENDENT COUNSEL.
(a) Inlet and IDC have been represented by ▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
P.C. in the negotiation and execution of this Agreement and have not relied on
any other legal counsel with
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respect to any matter relating thereto. DeltaPoint and Merger Sub have been
represented by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., in the negotiation and
execution of this Agreement and have not relied on any other legal counsel
with respect to any matter relating thereto.
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IN WITNESS WHEREOF, DeltaPoint, Inlet, IDC Acquisition Corp. and Inlet
Divestiture Corp. have caused this Agreement to be signed (by their duly
authorized respective officers, as applicable), all as of the date first written
above.
DELTAPOINT, INC.: INLET, INC.:
By _____________________________ By __________________________________
Name:___________________________ Name:________________________________
Title:__________________________ Title: ______________________________
IDC ACQUISITION CORP.: INLET DIVESTITURE CORP.:
By _____________________________ By ___________________________________
Name:___________________________ Name:_________________________________
Title:__________________________ Title:________________________________